Foreign Direct investment in India

INDIA ranks second in the world in terms of financial attractiveness, people and skills availability and business environment. This is revealed in AT Kearney's 2007 Global Services Location Index. Country's financial stability in the current environment of financial turbulence and a possible unwinding of macro imbalances sends clear message to the prospective foreign investors about India's position as an expanding investment destination. "India's external sector has displayed considerable strength and resilience since the reforms in 1991- despite several domestic as well as global political events and supply shocks in food and fuel........we partner with the global economy fully on the trade and current account while there is progressive liberalisation of the capital account, consistent with the progress in reforms in the real, fiscal and financial sectors", observed Dr Y.V.Reddy, Governor of India's central banking authorities, Reserve Bank of India (RBI) at the World Leaders Forum in New York in April this year. "The strong macro economic fundamentals, growing size of the economy and improving investment climate has attracted global corporation to invest in India. A major outcome of the economic reforms process aimed at opening up the economy and embracing globalization has led to to tremendous increase in Foreign Direct Investment inflows into India", says country's powerful industry lobby CII.

CUMULATIVE FDI EQUITY INFLOWS

In Rs Crore

In US$ Million

Cumulative amount of FDI inflows (From August 1991 to March 2007)

232041

54628

Amount of FDI inflows during 2007-08 (From April 2007 to February 2008)

80732

20136

Cumulative amount of FDI Inflows (Up to February 2008)

312773

74764

SOURCE: DIPP, Federal Ministry of Commerce & Industry, Government of India

Branding India as a "safe and stable" investment destination amid global financial turmoil, country's Commerce and Industry minister Kamal Nath expects FDI inflows into India during the current fiscal year (2008-09) will close at $ 35 billion signifying over $ 11 billion invested in the previous financial year (India's fiscal year is April to March). In 2007-08, reinvested earnings of foreign firms in India stood at $ 5.5 billion. Global firms have routed most of the investment through tax havens like Mauritius and Singapore during 2007-08, while Japanese firms have poured more money into India. Lot of investment is expected to flow into petroleum, manufacturing and electronic hardware sectors, Nath said.

Year Wise FDI inflows into Infrastructure sector during April 2000 to December 2007
(In US$ million)

YEAR

AMOUNT

2000-01

292.37

2001-02

1902.26

2002-03

347.33

2003-04

388.37

2004-05

456.00

2005-06

914.04

2006-07

2179.39

2007-08 (Up to December 2007)

4095.80

TOTAL

10575.56

SOURCE: Federal Ministry of Commerce and Industry, Government of India

Policymakers estimate that to sustain high growth rate India will need massive investment in the five year period to March 2012, including $500 billion in infrastructure, to sustain high growth rates. In January, India raised FDI limits in petroleum refinery, aviation, commodity exchanges, credit information companies and mining of some precious metals to attract more capital and boost growth in those sectors. But the Left-backed and Congress(I)-led UPA government has so far not been able to raise FDI limits in insurance or open up the retail trade sector further. The government is in the process of fine tuning FDI rules in order to make India more attractive as FDI destination.

FDI Equity Inflows (2007-08)

MONTHS

In Rs crore

In US$ Million

April 2007

6927

1643

May 2007

8642

2120

June 2007

5048

1238

July 2007

2849

705

August 2007

3394

831

September 2007

2876

713

October 2007

8008

2027

November 2007

7353

1864

December 2007

6146

1558

January 2008

6960

1767

February 2008

22529

5670

March 2008

2007-08 (Up to February 2008)

80732

20136

2006-07 (Up to February 2007)

53734

11888

YOY Growth (%)

(+) 50

(+) 69

SOURCE: DIPP, Federal Ministry of Commerce & Industry, Government of India

In FDI equity investments mauritius tops the list of first ten investing countires followed by US, UK, Singapore, Netherlands, Japan, Germany, france, Cyprus and Switzerland. Between 2000 and February 2008 FDI inflows from Mauritius stood at $ 24 billion followed by $4 billion from USA; $ 3.46 billion from the UK; $ 2.69 billion from Singapore; $ 2.53 billion from the Netherlands; $ 1.94 billion from Japan; $1.32 billion from Germany; $705 million from france; $ 685 million from Cyprus; and $ 634 from Switzerland.

Top ten investing (FDI Equity) countries (In Rs. crore)

COUNTRY

2004-05

2005-06

2006-07

2007-08 (Up to February 2008)

Cumulative (From April 2000 to February 2008)

YOY Growth (%) in terms of Rs

Mauritius

5141
(1129)

11441
(2570)

28759
(6363)

37895
(9463)

103785
(24003)

45.49

USA

3055
(669)

2210
(502)

3861
(856)

2540
(627)

18121
(4070)

9.12

UK

458
(101)

1164
(266)

8389
(1878)

1103
(274)

15478
(3461)

7.79

Singapore

822
(184)

1218
(275)

2662
(578)

5632
(1411)

11438
(2695)

5.76

Netherlands

1217
(267)

340
(76)

2905
(644)

2101
(525)

11243
(2535)

5.66

Japan

575
(126)

925
(208)

382
(85)

2630
(637)

8629
(1948)

4.34

Germany

663
(145)

1345
(303)

540
(120)

1195
(293)

5859
(1323)

2.95

France

537
(117)

82
(18)

528
(117)

358
(89)

3159
(705)

1.59

Cyprus

12
(3)

310
(70)

266
(58)

2192
(534)

2874
(685)

1.45

Switzerland

353
(77)

426
(96)

257
(56)

861
(211)

2792
(634)

1.41

Total FDI inflows*

17138
(3754)

24613
(5546)

70630
(15726)

51243
(12699)

222680
(50628

-

SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India
Figures in bracket are in US$ million

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June 2008